What‘s Not To Love About These Great Bull Runs?

A bit of selling at the open, and off to new highs – the S&P 500 bulls are taking no prisoners. The long recent consolidation has been broken, and it was again to the upside. Options traders are still having a hard time agreeing with the declining VIX, which is pointing to them serving as still some more cannon fodder next in the bullish advance. In fairness though, it can‘t be denied that the average put/call ratio has been rising over the last 3 months.

Still, that doesn‘t change the reality that my reasonably and justifiably aggressive long positions in both S&P 500 and gold, are going even more profitable. No problem that the Russell 2000 didn‘t climb as much – emerging markets stepped into the void on account of predictably cratering USD.

Friday didn‘t bring any changes to the narratives – the very weak non-farm payrolls weren‘t a selling catalyst in the least. All eyes remain on reopening trades to the effect that value stocks are rising effortlessly whatever the direction of the nominal rate. In spite of inflation and inflation expectations not being negligible, we‘re still in the reflationary period where economic growth is higher than either of these two.

Not only is the S&P 500 advance a very broad one as evidenced by the number of stocks trading above their 50-day moving average (with tech playing a positive role once again), commodities continue being on fire. Especially the base metals such as copper welcomed the uptick in inflation expectations. With the recent two trial balloons (Kaplan and Yellen), the Fed might be exploring market reactions if it had moved to counter inflation at least to some degree. Hold not your breath though, that would tank the risk-on assets – they won‘t do that any time soon.

Gold is making its run, unhampered by the nominal yields rising on the day. Miners have continued their advance, and the precious metals upleg offers a sight of health. Note also that the silver miners have been doing overall better than the gold ones throughout the long soft patch starting in Aug 2020, just as silver did. That‘s precisely what to expect in an environment of inflation running hot:

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